Teva Stock: Here’s Why BTIG Is Sticking with the Bears Despite Q1 Earnings Beat

Though Teva served up a strong first quarter for 2018, BTIG's Tim Chiang continues to make a bearish case on this challenged Israeli pharma giant.

Teva Pharmaceutical (NYSE:TEVA) delivered a stronger-than-anticipated first quarter earnings show this morning to the Street, along with a guidance boost for 2018. Yet, one bear continues to watch out for red flags around two of the Israeli pharma giant’s drugs: blockbuster multiple sclerosis treatment Copaxone and preventative treatment of migraine Fremanezumab. BTIG analyst Tim Chiang sees rising competition as bound to clip at the heels of Copaxone revenue and likewise keeps a wary eye on Fremanezumab, where the approval and launch of this drug has been delayed to the end of the year.

As such, these concerns leave the analyst reiterating a Sell rating on TEVA stock with a $17 price target, which implies a 6% downside from current levels. (To watch Chiang’s track record, click here)

For the first quarter, the giant unleashed $5,065 million in revenue against the analyst’s $4,724 million forecast and $0.94 in adjusted EPS, above the analyst’s $0.74 estimate. The strength in this part of the print rides a wave of better-than-anticipated Copaxone sales coupled with a step up in segment profitability from the international segments. On back of this strength, Teva has jumped its revenue, operating income, and EBITDA for the year to the tune of roughly $200 million. Now, the Teva team calls for $18.5 to $19 billion in total revenue for 2018, as well as $4.9 to $5.2 billion in EBITDA and $2.40 to $2.65 in EPS. The analyst acknowledges, “In sum, it appears that new CEO Kare Schultz’s aggressive restructuring program is having a positive impact on the Co.’s financial performance.” In fact, Teva even dialed down debt on the balance sheet from $32.5 billion in the fourth quarter to approximately $30.8 billion.

Ultimately, “While Teva did a commendable job reporting a better than expected quarter, and raising financial guidance, we believe Copaxone sales and profit erosion is likely to accelerate with the entry of Sandoz (division of Novartis […] 40mg Glatopa. In addition, we think Teva will be at a disadvantage with the ongoing approval delays on fremanezumab […] In addition, with Teva’s product being a pre-filled syringe we see this as a disadvantage to competing product offerings – erenumab from Amgen […] / Novartis, and galcanezumab from Eli Lilly […] While we do think Teva’s fremanezumab may be the only product with a once-quarterly dosing profile (others are dosed once-monthly), our physician checks coming back from the AAN meeting are that cost of the new treatments will be an issue, which could impact the rate of formulary adoption that occurs with the CGRPs,” Chiang contends.

TipRanks reveals the beleaguered biotech giant still has work left to do in its turnaround when it comes to sentiment among sell-side analysts. Out of 16 analysts polled in the last 3 months, only 2 are bullish on TEVA stock, a whopping 10 remain sidelined, while 4 are running for the hills on the stock’s prospects. With a slight loss potential of nearly 2%, the stock’s consensus target price stands at $18.04.

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